The growth of European sea wind will also help drive the growth of domestic parts enterprises that have entered the European sea wind supply system, and it is recommended to pay attention to the links of sea cables, foundations, and some wind turbine components.
Intelligent Finance News APP learned that CITIC Securities published a research report stating that policy support, an increase in the auction volume of offshore wind projects, and an improvement in financing environment may promote a new round of prosperity in European offshore wind power. In terms of policy, the tariff contract electricity price supports the development of offshore wind power; in terms of offshore wind auction, the European Commission recently approved a 10.8 billion euro plan to support 2.4-2.8GW offshore wind power projects in France; in terms of financing environment, the European Central Bank decided on June 6, 2024 to lower all three key interest rates in the euro area by 25 basis points. The expected downward interest rate will also create a good environment for offshore wind financing. In addition, the expansion of production capacity will also provide support for the growth of installed capacity.
The bank stated that the growth of European offshore wind power will also help drive the growth of domestic component companies' orders and shipments that have entered the European offshore wind supply system. The bank recommends paying attention to some components like cables, foundations and wind turbine parts.
The opinion of Citic Securities is as follows:
Various factors may promote a new cycle of prosperity for European sea wind.
Various factors may promote a new round of prosperity in European offshore wind power. According to data from GWEC, the average annual growth rate of newly installed capacity for global offshore wind power in the next 10 years is 20%. Among them, the growth rate of offshore wind power installed capacity in Europe is the most obvious. It is expected that the newly installed capacity of European offshore wind power in 2024-2026 will be 3.7GW/5.6GW/8.4GW, respectively. Recently, the increase in the number of European offshore wind power project auctions will provide project reserves for the construction of wind power projects after 2027, opening up long-term growth space for European offshore wind power projects. European sea wind may usher in a new round of prosperity.
The number of offshore wind project auctions may significantly increase, supporting the construction of mid- to long-term offshore wind power.
According to a report by China Energy Net, the European Commission recently approved a 10.82 billion euro plan to support the construction and operation of French offshore wind power, involving two projects with a total capacity of 2.4-2.8GW, of which The planned capacity of the South Atlantic/Oleron wind farm is 1.0-1.2GW; the planned capacity of the Normandy2 wind farm is 1.4-1.6GW. The two projects are expected to start the auction process in the 24Q3, and the expected production time is in 2033. The bank expects that in the second half of 2024, several European countries, including France, Germany, and Denmark, will gradually open auctions for offshore wind power projects, and the number of auctions is expected to set a historical record. The increase in the number of offshore wind power project auctions will also provide project support for the construction of European offshore wind power after 2027.
The increase in the number of offshore wind power auctions is due to policy support such as tariff contracts.
The most important factor in the increase in the number of European offshore wind power auctions is due to policy support. Previously, the British government decided to increase the highest execution electricity price of domestic offshore wind power projects' tariff contracts (CfD) from 44 pounds/MWh to 73 pounds/MWh, an increase of 66%. At the same time, it also raised the price of floating offshore wind projects from 116 pounds/MWh to 176 pounds/MWh, an increase of 52%. In addition, the carbon emission reduction level of the supply chain of related projects will also become an important condition for whether higher electricity prices can be obtained in the bidding in 2025. According to the tariff contract agreement, when the market electricity price is lower than the agreed price between the government, the government will compensate for the price difference. When the actual selling price is higher than the agreed price, the power company will return the additional revenue from selling electricity to the government.
The expected downward interest rate will create a good environment for offshore wind financing.
On June 6, 2024, the European Central Bank decided to lower all three key interest rates in the euro area by 25 basis points. Among them, the deposit facility interest rate, the main refinancing interest rate, and the marginal lending facility interest rate were lowered to 3.75%, 4.25%, and 4.5%, respectively. This is the first interest rate cut by the European Central Bank since 2019. The expected downward interest rate will also create a good environment for offshore wind financing. In addition, European developers are also actively seeking to improve their financing and enhance their balance sheet capacity to effectively support the development of future offshore wind power projects.
The prosperity of the European sea wind bidding and construction will drive the growth of the industry chain's output.
The prosperity cycle that European offshore wind power may open will also drive the growth of the output of the industry chain. Some links of Chinese domestic enterprises have entered the supply system of European offshore wind power, and they have obvious first-mover advantages.
Investment strategy:
European offshore wind power will open a new round of bidding and construction prosperity cycle, and the increase in the number of auction bids will open up the mid- to long-term growth space of European offshore wind power. The growth of project capacity will also drive the increase in the output of the industry chain. The bank recommends paying attention to the growth of orders and shipments of domestic parts enterprises that have entered the European sea wind supply system, and recommends paying attention to the links of sea cables, foundations, and some wind turbine components.
Risk factors: The construction of new offshore wind power projects is lower than expected, the downward interest rate is lower than expected, and the EU has trade protection barriers for related products of offshore wind power.
